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CAT 2016 Slot 1 · VARC · Odd Sentence Out · medium

Compound interest allows an investment to grow faster over time because interest is earned on both the original principal and on previously…

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Five sentences related to a common theme are given below, labelled 1 to 5. Four of them can be sequenced into a coherent, meaningful paragraph; one does not fit. Identify the sentence that does not fit.

1. Compound interest allows an investment to grow faster over time because interest is earned on both the original principal and on previously accumulated interest.
2. Albert Einstein is popularly, though almost certainly apocryphally, said to have called compound interest the eighth wonder of the world.
3. Over short periods the difference between compound and simple interest is small, but the gap widens dramatically over decades.
4. A sum invested at a modest annual rate can, given enough time, multiply many times over purely through this compounding effect.
5. This is why financial advisors frequently emphasise starting to invest early, since time itself becomes a multiplier of returns.
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Answer: 2

Sentences 1, 3, 4 and 5 build a coherent explanation of how compounding works and why it matters for long-term investing. Sentence 2 is a tangential, explicitly flagged as likely apocryphal, anecdote about a quotation attributed to Einstein, which interrupts rather than advances this explanatory sequence, making it the odd one out.
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Original question written in the CAT 2016 Slot 1 pattern and checked twice for the correct answer. Not an official question paper. How we write and check questions · Corrections policy · Report a mistake